Correlation Between Barloworld and Valic Company

Can any of the company-specific risk be diversified away by investing in both Barloworld and Valic Company at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Barloworld and Valic Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barloworld Ltd ADR and Valic Company I, you can compare the effects of market volatilities on Barloworld and Valic Company and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Barloworld with a short position of Valic Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Valic Company.

Diversification Opportunities for Barloworld and Valic Company

-0.05

Correlation Coefficient

Barloworld  Valic Company

Good diversification

The 3 months correlation between Barloworld and Valic is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Valic Company I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valic Company I and Barloworld is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Barloworld Ltd ADR are associated (or correlated) with Valic Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valic Company I has no effect on the direction of Barloworld i.e., Barloworld and Valic Company go up and down completely randomly.

Pair Corralation between Barloworld and Valic Company

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 4.96 times more return on investment than Valic Company. However, Barloworld is 4.96 times more volatile than Valic Company I. It trades about 0.04 of its potential returns per unit of risk. Valic Company I is currently generating about 0.03 per unit of risk. If you would invest  480.00  in Barloworld Ltd ADR on October 4, 2024 and sell it today you would earn a total of  181.00  from holding Barloworld Ltd ADR or generate 37.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.52%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Valic Company I

Barloworld ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.

Valic Company I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valic Company I has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Valic Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barloworld and Valic Company

The main advantage of trading using opposite Barloworld and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Valic Company can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Valic Company will offset losses from the drop in Valic Company's long position.

The idea behind Barloworld Ltd ADR and Valic Company I pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.